Belden, Inc., acquires 30 percent of the outstanding voting shares of Sheffield, Inc., on January 1, 2020, for $304,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $820,000 at January 1, 2020. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values, except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16 years at January 1, 2020. No goodwill resulted from Belden's share purchase. Sheffield reported net income of $198,000 in 2020 and $252,000 of net income during 2021. Dividends of $74,000 and $90,000 are declared and paid in 2020 and 2021, respectively. Belden uses the equity method. a. On its 2021 comparative income statements, how much income would Belden report for 2020 and 2021 in connection with the company's investment in Sheffield? b. If Belden sells its entire investment in Sheffield on January 1, 2022, for $410,000 cash, what is the impact on Belden's income? c. Assume that Belden sells inventory to Sheffield during 2020 and 2021 as follows: Year 2020 2021 Required: Determine the following amounts. a. b. Cost to Price to Belden Sheffield $29,700 $54,000 29,500 59,000 C. Equity income 2020 Equity income 2021 Equity income 2021 Year-End Balance (at Transfer Price) $18,000 (sold in following year) 40,000 (sold in following year) on sale of investment
Belden, Inc., acquires 30 percent of the outstanding voting shares of Sheffield, Inc., on January 1, 2020, for $304,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $820,000 at January 1, 2020. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values, except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16 years at January 1, 2020. No goodwill resulted from Belden's share purchase. Sheffield reported net income of $198,000 in 2020 and $252,000 of net income during 2021. Dividends of $74,000 and $90,000 are declared and paid in 2020 and 2021, respectively. Belden uses the equity method. a. On its 2021 comparative income statements, how much income would Belden report for 2020 and 2021 in connection with the company's investment in Sheffield? b. If Belden sells its entire investment in Sheffield on January 1, 2022, for $410,000 cash, what is the impact on Belden's income? c. Assume that Belden sells inventory to Sheffield during 2020 and 2021 as follows: Year 2020 2021 Required: Determine the following amounts. a. b. Cost to Price to Belden Sheffield $29,700 $54,000 29,500 59,000 C. Equity income 2020 Equity income 2021 Equity income 2021 Year-End Balance (at Transfer Price) $18,000 (sold in following year) 40,000 (sold in following year) on sale of investment
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Belden, Inc., acquires 30 percent of the outstanding voting shares of Sheffield, Inc., on January 1, 2020, for $304,000, which gives
Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $820,000 at January 1, 2020. Sheffield's asset
and liability accounts showed carrying amounts considered equal to fair values, except for a copyright whose value accounted for
Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16 years at January 1, 2020. No
goodwill resulted from Belden's share purchase.
Sheffield reported net income of $198,000 in 2020 and $252,000 of net income during 2021. Dividends of $74,000 and $90,000 are
declared and paid in 2020 and 2021, respectively. Belden uses the equity method.
a. On its 2021 comparative income statements, how much income would Belden report for 2020 and 2021 in connection with the
company's investment in Sheffield?
b. If Belden sells its entire investment in Sheffield on January 1, 2022, for $410,000 cash, what is the impact on Belden's income?
c. Assume that Belden sells inventory to Sheffield during 2020 and 2021 as follows:
Year
2020
2021
a.
Required:
Determine the following amounts.
b.
Cost to Price to
Sheffield
$54,000
59,000
C.
Belden
$29,700
29,500
Equity income 2020
Equity income 2021
Equity income 2021
Year-End Balance.
(at Transfer Price)
$18,000 (sold in following year)
40,000 (sold in following year)
on sale of investment
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education